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Exam 10: Property Acquisition and Cost Recovery

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Question 1

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Amit purchased two assets during the current year. Amit placed in service computer equipment(5-year property) on April 16th with a basis of $5,000 and furniture (7-year property) on September9th with a basis of $20,000. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation). (Use MACRS Table 1)

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$3,858
The half-year convention applies ...

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Question 2

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Businesses may immediately expense research and experimentation expenditures or they may elect to capitalize these costs and amortize them using the straight-line method over a period of not less than 60 months.

A) True
B) False

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Question 3

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Taxpayers may use historical data to determine the recovery period for tax depreciation.

Tax depreciation is currently calculated under what system?

Teddy purchased only one asset during the current year. Teddy placed in service machinery (7-year property) on October 1st with a basis of $76,500. Calculate the maximum depreciation expense,rounded to the nearest whole number (ignoring §179 and bonus depreciation). (Use MACRS Table2 in the text)

Bonnie Jo used two assets during the current year. The first was computer equipment with an original basis of $15,000, currently in the second year of depreciation, and under the half-yearconvention. This asset was disposed of on October 1st of the current year. The second was furniture with an original basis of $24,000 placed in service during the first quarter, currently in the fourth year of depreciation, and under the mid-quarter convention. What is Bonnie Jo's depreciationexpense for the current year? (Round final answer to the nearest whole number) (Use MACRSTable 1 and Table 2)

Assume that Yuri acquires a competitor's assets on May 1st. The purchase price was $500,000. Of the amount, $325,000 is allocated to tangible assets and $175,000 is allocated to goodwill (a §197 intangible asset). What is Yuri's amortization expense for the current year? (Round final answer to the nearest whole number)

Business assets that tend to be used for both business and personal purposes are referred to as listed property.

Geithner LLC patented a process it developed in the current year. The patent is expected to create benefits for Geithner over a 10-year period. The patent was issued on April 15th and the legal costs associated with the patent were $43,000. In addition, Geithner had unamortized research expenditures of $15,000 related to the process. What is the total amortization expense Geithner may deduct during the current year?

Businesses deduct percentage depletion when they sell the natural resource and they deduct cost depletion in the year they produce or extract the natural resource.

Taxpayers may always expense a portion of start-up costs and organizational expenditures.

Jorge purchased a copyright for use in his business in the current year. The purchase occurred on July 15th and the purchase price was $75,000. If the patent has a remaining life of 75 months, what is the total amortization expense Jorge may deduct during the current year?

If a business mistakenly claims too little depreciation, the business must only reduce theasset's basis by the depreciation actually taken rather than the amount of the allowable depreciation.

The basis for a personal use asset converted to business use is the lesser of the asset'scost basis or fair market value on the date of the transfer or conversion.

Eddie purchased only one asset during the current year. Eddie placed in service furniture (7-year property) on May 1st with a basis of $26,500. Calculate the maximum depreciation expense, rounded to the nearest whole number (ignoring §179 and bonus depreciation). (Use MACRS Table 1)

If tangible personal property is depreciated using the half-year convention and is disposed of during the first quarter of a subsequent year, the taxpayer must use the mid-quarter convention for the year of disposition.

Kristine sold two assets on March 20th of the current year. The first was machinery with an original basis of $51,000, currently in the fourth year of depreciation, and under the half-year convention. The second was furniture with an original basis of $16,000 placed in service during the fourth quarter, currently in the third year of depreciation, and under the mid-quarter convention. What is Kristine's depreciation expense for the current year if the depreciation recovery period is 7-years? (Use MACRS Table 1 and Table 2) EXHIBIT 10-6 (Round final answer to the nearest whole number)

Boxer LLC has acquired various types of assets recently used 100% in its trade or business. Below is a list of assets acquired during 2016 and 2017: Boxer did not elect §179 expense and elected out of bonus depreciation in 2016, but would like to elect §179 expense for 2017 (assume that taxable income is sufficient). Calculate Boxer's maximum depreciation expense for 2017, (ignore bonus depreciation for 2017). If necessary, use the 2016 luxuryautomobile limitation amount for 2017. (Use MACRS Table 1 and Use MACRS Table 5 in the text)Exhibit 10-8 (Round final answer to the nearest whole number)

Tom Tom LLC purchased a rental house and land during the current year for $150,000.The purchase price was allocated as follows: $100,000 to the building and $50,000 to the land. The property was placed in service on May 22. Calculate Tom Tom's maximum depreciation for this first year. (Use MACRS Table 3 in the text)